eSign act: How to use Legal Electronic Signatures in the U.S. with Signeasy

It’s no secret, legal electronic signatures are what keeps business documentation flows functional even during the physically distanced COVID-19 situation. No more printing, physically signing, scanning documents and hand-delivering contracts. It shrinks document approval processes from weeks to just minutes and also makes it so much easier to track, manage and store. But, the real question is – are electronic signatures legally binding in all 50 US states? The short answer is ‘yes, absolutely’. The ESIGN Act (Electronic Signatures in Global and National Commerce) is one of the esignature law (s) that assures it.

What is the ESIGN Act?

In 2000, the U.S government passed the ESIGN Act to ease the adoption of electronic signatures, ushering in a new era of document streamlining in all US locations where federal law applies. According to the act, an electronic signature is defined as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” This act ensures that:

• eSignatures can be used in the court of law as evidence
• eSignatures are as legally viable an option as wet signatures
• The effect, validity and enforceability of electronic documents are not denied 

However, 17 years later, most businesses still do not understand the legality of electronic signatures. During consultations, our clients frequently ask us how they can ensure their electronically signed documents hold up in a court of law. This blog will help you better understand what it takes for electronic signatures to be legally binding in the U.S.

Is ESIGN Act the only enforceable electronic signature regulation in the U.S?

No. In addition to the ESIGN Act, the Uniform Law Commission drafted UETA (Uniform Electronic Transactions Act) in 1999 to provide a legal framework for electronic signature use per state. It outlines the legal signature requirements relating to everything from transferable records to automated transactions and retention of records. UETA has been adopted by 48 US states. While Illinois and New York have not adopted UETA, they have implemented similar statutes validating e-signatures.   Here is a snapshot of the e-signature laws applicable to each US state: ESIGN Act & UETA applies to 48 US states

Alabama, Alaska, Arizona, Arkansas, California,  Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa,  Kansas, Kentucky, Louisiana, Maine, Maryland,  Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming. Other e-signature laws Illinois –Law 5 ILCS 175/1-101 New York – Electronic Signatures and Records Act (ESRA)

• Illinois’ Electronic Signature Law 5 ILCS 175/1-101, also enacted in 1999, considers some types of eSignatures to be more secure than others. Some of the factors that define such eSignatures are:
  • Both parties concur on the ‘secure nature’  of the signature
  • Applied by both parties in a verifiable manner
  • Created in a manner that can be deemed commercially reasonable
  • Can be relied upon by all parties in good-faith
• The Electronic Signatures and Records Act (ESRA), enacted in 2000, deems electronic Signatures as legally binding as wet signatures in New York. There is even a best practices guide for those who wish to use eSignatures under the ambit of ESRA.

Note: The UETA and the ESIGN Act cover business, governmental affairs and e-commerce transactions. But, they do not apply to the likes of wills and marriage, death, birth certificates, codicils and testamentary trusts (as specified under section 103 of the ESIGN act). 

What do the ESIGN Act and UETA imply?

Both UETA and ESIGN grant electronic signatures the same legal status as traditional wet ink signatures in the U.S. These acts:

• Establish that any law with a signature requirement can be satisfied by an electronic signature.
• Allow electronically executed agreements to be presented as evidence in court.
• Prevent denial of validity or enforceability of an electronically signed document solely because it is in an electronic form.

How to ensure that your documents are legally compliant in the US?

For an electronic signature to be legally binding, it must meet the following requirements:

(i) Intent to sign & opt-out clause

As is the case with traditional wet ink signatures, electronic signatures are valid only if a user demonstrates a clear intent to sign. For example, Signeasy allows users to opt out of electronically signing a document by providing the option to decline signature requests.

(ii) Consent to do business electronically

The respective parties must either express or imply their consent to do business electronically. Most leading e-signature softwares prompt users to confirm their consent before they sign.

(iii) Clear signature attribution

The context and circumstances under which the document was signed can indicate the attribution of an electronic signature. Signeasy ensures proper attribution by providing users a detailed audit trail. This trail goes from the signer’s email ID to the device IP address to the signature timestamp each time they sign a document electronically.

(iv) Association of signature with the record

It is critical for electronic signatures to be connected to the document being signed. For example, Signeasy does not allow electronic signatures to be transmitted to anyone except as part of a signed document sent by the signer.

(v) Record retention

The esign act ensures the validity of electronic signature records as long as they accurately reflect the agreement and can be reproduced as required. Most leading electronic signature softwares address this by providing a fully-executed signed copy or by allowing them to download a copy of the signed document.

Validating and Verifying Electronic Signatures

Validating and verifying electronic signatures is essential to ensure their authenticity, integrity, and the identity of the signatories. Here are several commonly used methods and techniques for this purpose:

• Hashing Algorithms: Hashing algorithms generate unique digital fingerprints, or hash values, for signed documents. By comparing the computed hash value with the original one, you can verify that the document has not been altered since it was signed.
• Digital Certificate Verification: Digital certificates issued by trusted authorities contain information about the signatory’s identity and a unique digital signature. Verifying the associated digital certificate involves checking its validity, authenticity, and if it has been tampered with.
• Public Key Infrastructure (PKI): PKI enables secure communication and electronic signatures using public key cryptography. Verifying electronic signatures through PKI involves validating the digital certificate, verifying the signatory’s public key, and confirming the integrity of the digital signature using the signatory’s corresponding private key.
• Timestamping: Timestamping associates a trusted timestamp with a signed document, indicating the exact time of signing. Verifying the timestamp against a trusted time source helps establish the chronological order of signature events and detect unauthorized changes.
• Authentication Mechanisms: Verifying the signatories’ identity is crucial. Various authentication methods, such as username and password credentials, biometric authentication, or two-factor authentication, can be used to ensure the identity of the signatories.
• Third-Party Verification Services: Third-party verification services can provide an additional layer of trust and validation for electronic signatures. These services offer advanced verification processes, including document comparison, integrity checks, and compliance with industry standards and regulations.

It’s important to note that the specific methods and techniques may vary depending on the technology platform or service provider used. Choosing a reputable and trusted electronic signature solution like Signeasy is recommended, as it incorporates robust validation and verification mechanisms to ensure the legal admissibility and integrity of electronic signatures. The above-mentioned factors will help you choose a legally binding electronic signature software that suits your needs, with ease. Adopt electronic signatures and boost your business by signing up for our free trial today!